CMI sees shift toward branded apples

“The first is the big increase in Honeycrisp production, with estimates calling for a 25 percent increase over last year, which would be a nearly 60 percent increase over the crop of just two years ago,” he said. “That means there will be more Honeycrisp promotions longer into the season than we’ve ever seen.”

The second big theme is the continued increase in the supply of the popular branded apples. These high-flavor apples are driving significant dollar growth in the category and retailers have been clamoring for greater supplies to boost distribution.

“At CMI, we will be up 20 percent in Ambrosia, up 120 percent in Kanzi, up 49 percent in KIKU, up 56 percent in Envy and up 152 percent in Smitten,” Lutz said. “The big increases in the high-flavor, branded apples is great because in previous years we’ve been in an oversold situation. So it will really be an exciting year as retailers have supplies of branded apples to really make an impact on consumers.”

The big increases in the high-flavor, branded apples is great because in previous years we’ve been in an oversold situation. So it will really be an exciting year as retailers have supplies of branded apples to really make an impact on consumers.

— Steve Lutz, Senior Strategist at CMI Orchards

The shift toward branded apples and Honeycrisp is also driving up the average transaction size. When consumers shift to purchasing more expensive apples it drives growth for the entire category even if the change in volume is relatively small.

“This puts tremendous pressure on the legacy apple varieties which almost universally carry the lowest retail prices in the category,” Lutz said. “What we know definitively is retail chains that use low pricing to focus consumer attention on legacy varieties under-perform in the apple category. It’s really pretty straightforward. Hot pricing on low-cost apples shifts consumer purchases directly into whatever apple is cheap. The result is a decline in category dollars as consumers move out of the more expensive apples they usually buy, substituting the hot promotional item.”

The key, Lutz noted, is to recognize the financial opportunity of dedicating some promotion and merchandising activities directly at shifting consumers up to high-flavor branded apples vs. trading consumers down to commodity apples.

CMI is predicting an increase in production of about 5 percent overall, driven by the jump in its Honeycrisp and branded apples. It also expects a very normal year in terms of crop timing.